Jobs growth slows, unemployment rate falls to 4.4%

Fed unlikely to cut rates this month, futures show 4.8% chance

Supreme Court doesn’t rule on Trump’s tariff policies on Friday

(Updated in New York afternoon time)

NEW YORK, Jan 9 (Reuters) –

Interest rate sensitive two-year Treasury yields rose on Friday after data showed that jobs growth slowed more than expected in December while the unemployment rate fell, supporting expectations the Federal Reserve would leave interest rates unchanged this month. Employers added 50,000 jobs during the month. Economists polled by Reuters had expected 60,000 new jobs. The unemployment rate, meanwhile, fell to 4.4%, below economists’ forecast of 4.5%.

“It was a decent report suggesting neither re-acceleration nor material slowing,” said Jonathan Cohn, head of U.S. rates desk strategy at Nomura in New York.

“The decline back to 4.4% in the unemployment rate from the revised 4.5% in the prior month is constructive, though at least a portion of that was expected given the impact of the government shutdown and the reporting of furloughed employees. Alongside a headline NFP that was around typical break-even estimates, that squeezed out the last bit of Jan cut pricing,” Cohn said.

Fed funds futures traders are now pricing in only a 4.8% chance of a rate cut at the Fed’s January 27-28 meeting, down from 11.6% before the data. The next cut is unlikely before at least April. A sharply divided Fed cut interest rates last month but signaled borrowing costs are unlikely to drop further in the near term as it awaits clarity on the direction of a job market showing signs of softening, inflation that “remains somewhat elevated” and an economy it expects to pick up steam this year. Other data on Friday showed that U.S. consumer sentiment perked up in early January, but households continued to worry about inflation and a weakening labor market. The two-year note yield, which typically moves in step with Fed rate expectations, was last up 4.6 basis points on the day at 3.534% and reached 3.543%, the highest since December 23. The yield on benchmark U.S. 10-year notes fell 1.4 basis points to 4.183%. The yield briefly earlier touched 4.211%, the highest since September 4. The yield curve between two- and 10-year notes flattened by around 5 basis points to 63 basis points. Richmond Fed President Tom Barkin said on Friday that December job growth was “modest” and showed firms outside a narrow set of industries like healthcare and those associated with the buildout of artificial intelligence platforms remain reluctant to hire.

Atlanta Fed President Raphael Bostic said that inflation issues are still at the forefront of his

adding that the job market continues to be in a low-hire, no-fire mode amid broader uncertainties. Bonds rallied briefly late on Thursday after U.S. President Donald Trump said he was ordering his representatives to buy $200 billion in mortgage bonds to bring down housing costs. Federal Housing Finance Agency Director Bill Pulte said on X that Fannie Mae and Freddie Mac will execute the purchase. Thirty-year mortgage rates fell 22 basis points to 5.99% on Friday due to the announcement, Jefferies analyst Matthew Hurwit said in a report. “Although this change is meaningful, we note that consensus expectations already incorporated a decline in the 30Y toward 5.9% by (year-end),” he added. Meanwhile, the U.S. Supreme Court did not make a ruling on the legality of Trump’s tariff policies on Friday.

The court is expected to issue its next rulings on

but it does not announce in advance what cases will be decided. Traders are watching decision days for the tariff ruling, which is expected in the coming months.

Trump is expected to find alternative ways to implement tariffs if the current ones are struck down.

“There could be a period of time where there’s some friction with respect to the tariff proceeds, but the medium- to longer-term outlook shouldn’t be all that different,” said Cohn.

The largest risk would be if the U.S. government is ordered to refund tariffs that have already been collected. Geopolitical tensions are also in focus after the United States took Venezuelan leader Nicolas Maduro into custody and as Trump ramps up statements expressing his desire for the U.S. to acquire Greenland.

(Reporting by Karen Brettell; Editing by Philippa Fletcher and Emelia Sithole-Matarise)